Japan Stocks Fall After Three-Week Gain as Insurers Lead Losses

Japanese shares fell after the Topix index capped its best three weeks since 2014 as insurance companies and utilities retreated.

The Topix lost 1 percent to 1,361.90 at the close in Tokyo after the gauge posted a 15 percent gain in the three weeks through Friday. The Nikkei 225 Stock Average slipped 0.6 percent to 16,911.32. Investors also weighed a surge in U.S. hiring that came with a drop in wages, as well as China’s move to set a weaker growth target for this year. The yen was little changed at 113.69 per dollar.

"Shares rebounded quite a bit and now we need to reevaluate the situation,” Seiji Iwama, a fund manager at Daiwa SB Investments Ltd., said by phone. “We’re now seeing a correction in the shares which were overbought.”

The Topix Insurance Index declined 2.8 percent to lead losses among the measure’s 33 industry groups after jumping 25 percent from Feb. 12 through Friday. Tokio Marine Holdings Inc. retreated 3.3 percent on Monday. Power producers, railway stocks and food makers also declined. Toyota Motor Corp. was the biggest drag on the Topix, sliding 2.1 percent. Ono Pharmaceutical Co. rose 4.4 percent after announcing it’ll conduct a 5-for-1 stock split.

Sharp Corp. jumped 7.3 percent, extending last week’s 14 percent gain after people familiar with the matter said it will sign a $6 billion takeover agreement with Foxconn Technology Group as early as Monday.

The Topix’s three-week surge through Friday pushed the measure within 5 percentage points of a bull market. The gauge has recovered most of the losses after the Bank of Japan moved to negative interest rates. Eight industry groups, from banks to shippers, climbed more than 20 percent from January through the end of last week, helping make Japan the world’s best-performing developed equity market since Feb. 12.

Swings in Japanese shares have calmed, with the Nikkei 225 Volatility Index trading near its lowest in a month. Volume on the measure was about 21 percent below the 30-day average.

U.S. Futures

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent. The underlying equity gauge closed 0.3 percent higher on Friday, bringing its run during the past three weeks to 7.3 percent. The addition of 242,000 U.S. jobs in February exceeded economists’ forecasts for 195,000. Average hourly earnings dropped, the first monthly decline in more than a year.

Fed Odds

Traders raised the possibility of a Fed rate increase by June this year to 40 percent, up from 35 percent a week ago. Against that backdrop of higher borrowing costs in the U.S., the Bank of Japan has said it will not hesitate to move negative interest rates lower as necessary.

China outlined over the weekend a growth range of between 6.5 percent and 7 percent for 2016, with 6.5 percent pegged as the baseline through 2020. That would be less than last year’s 6.9 percent rate, the slowest growth in a quarter century. The government also abandoned its trade target, underscoring the degree of uncertainty about prospects for global growth.

“U.S. wages not being as good as we thought may be a weight on the market, but the jobs data overall isn’t looking bad,” said Yoshinori Ogawa, market strategist at Okasan Securities Co. Japan’s share gains over the last three weeks mean “we’re at a level where we can easily get selling.”

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